Andhra, Telangana punch holes in Centre's cash crunch theory
ATM without cash in Mumbai
"Majority of the bank branches are running out of cash every day. The currency crisis will become very serious in the coming days when the state government will have to make salary and pension payments on the 1st of March, 2018," Naidu wrote.
Calling the bluff on the cash crunch theory spun by the Central government, the state governments of Andhra Pradesh and Telangana say they had flagged their concerns to the union government and the Reserve Bank of India (RBI) well in advance.
Reports say on February 14, Andhra Pradesh Chief Minister N Chandrababu Naidu in a letter to the Finance Minister Arun Jaitley stated that the state "is facing a serious shortage of higher/lower denomination currency notes" and sought Rs. 5,000 crore from the RBI.
"Majority of the bank branches are running out of cash every day. The currency crisis will become very serious in the coming days when the state government will have to make salary and pension payments on the 1st of March, 2018," Naidu wrote.
Farmers are unable to withdraw the money paid to them against procurement of food grains, the letter said, adding that the state needed Rs. 450 crore to pay pensioners and Rs. 2,500 crore towards monthly salary payments.
On Tuesday, Jaitley admitted to a "temporary" shortage of currency that he said was caused by "sudden and unusual increase" in some areas.
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However, Telangana minister KT Rama Rao who claimed that the shortage of cash was "neither sudden nor temporary".
"I have been hearing complaints for over three months repeatedly in Hyderabad. Please have the RBI and finance ministry team dig deeper and not brush away an issue that is eroding people's confidence in banking system," Rao was quoted as saying.
On March 9, the Telangana chief secretary wrote to the RBI governor, highlighting the cash crisis in the state and requesting the supply of Rs. 6,000 crores for banks in the state.
Top officials say barely 30 to 40 per cent of ATMs in both the states have money and that urban areas are facing more cash crunch than rural areas.